Et Tu, Massachusetts? China Deal Undercuts U.S. Jobs

Massachusetts is awarding a contract to build rail cars to CNR Changchun Railway Vehicles, a Chinese state-owned company, a subordinate of China CNR Corporation Ltd. The company will do final assembly of the cars in Massachusetts.

“This is the preeminent manufacturer of rail cars in the world. And they want a presence in Western Massachusetts,” Patrick said.

Changchun wants to bid on rail and transit projects all over North America. The East Springfield facility will be Changchun’s North American headquarters.

The company was able to bid low enough to get this contract because of Chinese government subsidies such as grants, tax breaks, loans, and debt forgiveness.

This deal is a problem for two reasons. First, US companies cannot compete on a level playing field against companies that are subsidized by governments. China has a national focus on gaining key, strategic industries, and applies national resources as necessary to accomplish this. They understand the long-term value of being able to make a living as a country. Unfortunately they have been overdoing it, and running a very large trade surplus, which sets the rest of the world’s economy out of balance.

Second, this deal uses taxpayer dollars to undercut the long-term competitiveness of American companies that do the same work. They don’t get this contract, and the Chinese company gains a foothold in the US — with a factory and supply chain and in-country expertise — and as is able to compete for even more future business as a result. Again, this all done with US and Massachusetts taxpayer dollars.

The solution is not to ban non-US companies from bidding on such contracts. The solution is to be smart, and strategic and recognize that other countries have national plans to develop their own industries for their own national interests and we should as well. China offers various incentives and subsidies, such as grants, tax breaks, loans, and debt forgiveness to Chinese companies in order to boost strategic industries — we offer similar assistance to US companies as part of a national manufacturing/economic strategy. In other words we should see ourselves as a country with national interests.

And we should certain have clear Buy America domestic content rules in place when we use taxpayer dollars.

About Dave Johnson

Dave has more than 20 years of technology industry experience. His earlier career included technical positions, including video game design at Atari and Imagic. He was a pioneer in design and development of productivity and educational applications of personal computers. More recently he helped co-found a company developing desktop systems to validate carbon trading in the US.